Advisors Confident For Now But Long-Term Picture Is Gloomy

Financial advisors’ overall optimism about the current and future state of the U.S. economy and the stock market rose in July, according to a benchmark confidence index survey.

The rosy outlook bounced the sentiment indicator back to March levels and was fueled by a 3 percent increase in advisors’ favorable impression of the status of the economy, the WealthManagement.com Advisor Confidence Index (ACI) survey found.

In the bullish camp, Guy Baker of Wealth Team Solutions in Irvine, Calif., said the stock market was still in a position to climb further. “This will not be without fits and declines, but inflation always increases the market value,” he said, in a statement.

The survey of 150 financial advisors, however, also fell 3 percent when advisors were asked to rate the state of the economy and the stock market in 12 months, as the government further cuts spending and mortgage rates continue to rise.

“It’d be close to a miracle if we don’t go into a recession by the end of the year or the beginning of next year,” Bjorn Tuypens of Platinum Grove Asset Management in Purchase, N.Y., said in a statement. Cuts to government spending, a process known as “sequester,” and rising energy prices are going to “hit the U.S. economy hard” in the third quarter, he said.

The S&P 500 increased more than 12 percent in the first six months of the year, leading some market analysts to predict a strong second half of the year. Rising interest rates have also come as good news for life insurers, many of whom are reporting solid second quarter earnings.

Many advisors still feel the gains in the stock market remain somehow disconnected from the state of the economy, which is improving slowly, but not as fast as it should in the wake of a near-depression in 2008-2009.

The unemployment rate was 7.5 percent in August, a decline of .1 percent in July, the government reported last week.

“Uncertainty is the order of the day,” Roger Willroth, principal of Ames, Iowa-based Marrs Wealth Management, said in a statement. “We are caught between deflation and the possibility of reflation.”

Key ACI survey stats are: increase in the current state of the economy (3 percent), state of the economy in six months (flat), decrease in the state of the economy in 12 months (3.5 percent), increase in the state of the markets (4.9 percent).

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].